facta could darn near kill ya (a warning to businesses, retailers and restaurants)

The Fair and Accurate Credit Transactions Act of 2003 (“FACTA”) is intended to prevent a criminal from using a customer’s credit card information found on a discarded receipt.

Consequently, FACTA sensibly requires businesses to obliterate all but the last four digits of a customer’s credit card account number and to remove the card’s expiration date from receipts given to their customers.

So, what is the problem for businesses that accept credit cards?

Businesses rely on point of sale hardware (the machine the card is swiped through) and software to process credit card payments (a “POS” system). POS vendors, after 2004, probably sold systems that were FACTA compliant. However, a number of businesses own pre-2004 POS systems that haven’t been updated to make them compliant. It probably doesn’t even occur to these business operators to update a POS system unless it stops working properly. Therein rests a potentially very expensive surprise.

You must first understand that Congress intended the general public to enforce FACTA’s provisions. It did so by requiring a court to award minimum damages of up to $1,000, plus attorneys’ fees, if a customer can prove that the business knowingly failed to follow the law. In certain cases a customer can also recover punitive damages.

Lawyers who bring lawsuits under FACTA frequently attempt to do so as a class action, which, if successful, can result in your business suffering catastrophic damages.

The best way your business can protect itself against these claims is to make sure that the software that processes payments by credit cards complies with FACTA. It also makes sense to make an agreement with your POS vendor to advise you when there are new regulations. In addition, you should speak with your insurance agent, broker or consultant about acquiring insurance for losses that relate to Internet transactions.

By David K. Pinsonneault

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Posted in: Lawsuits

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